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The Investigation Division investigates suspected fraud committed by insurance agents, brokers, public adjusters, bail agents, insurance companies and other individuals and entities transacting the business of insurance who perpetrate fraud against consumers.

Insurance Commissioner Jones Files to Intervene In A Whistleblower Lawsuit Against Sutter Hospitals

News: 2011 Press Release

For Release: April 13, 2011

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Insurance Commissioner Jones Files to Intervene In A Whistleblower Lawsuit Against Sutter Hospitals

Commissioner Alleges Fraudulent Charges for Anesthesia Services

Insurance Commissioner Dave Jones today announced he filed to intervene in a "qui tam" (whistleblower) lawsuit for false billing of anesthesia services by Sutter Hospitals, one of the largest hospital chains in California and a dominant player in the Northern California health care market.

"Sutter's alleged fraud comes at the expense of the private health insurance industry, which initially pays for the services, but, ultimately, this unjust burden falls on the shoulders of California's consumers, who must foot the bill for inflated health care premiums," Commissioner Jones said."We believe the amount of the fraudulent charges is in the hundreds of millions of dollars, if not more. As Insurance Commissioner, I will use the full resources of this Department to root out insurance fraud in all forms and hold all those who engage in such fraud fully accountable."

In a "Complaint in Intervention," the Commissioner alleges that Sutter Hospitals submitted false bills for anesthesia services provided during operating room procedures. Specifically, Sutter Hospitals used an anesthesia billing code to charge for services and supplies that patients and their insurers had already paid for, either through other charges on the hospital bill or through the anesthesiologist's bill, which is billed separately from the hospital's bill. In some instances, the billing code is charged even though no anesthesiologist was present in the operating room and no general anesthesia was provided. These false bills are often extremely large and far in excess of the proper costs of the anesthesia services. The Commissioner seeks monetary penalties and damages, as well as broad injunctive relief to stop the fraudulent billing practice.

Background on the Litigation

The case was initially filed by Rockville Recovery Associates Limited, which for a number of years was hired by a private health care insurer to identify fraudulent bills submitted to it.

Rockville discovered the fraudulent scheme after reviewing bills submitted to the insurer by Sutter Hospitals, including at an onsite audit at one of Sutter's facilities. Rockville is represented by Lieff Cabraser Heimann & Bernstein, LLP in San Francisco and Hughes & Nunn, LLP in San Diego, and will continue to assist the Commissioner in prosecuting the lawsuit.

The defendants are Sutter and Multiplan, Inc., an intermediary between health insurers and the hospitals. Multiplan's agreements with Sutter and the insurers prevent the insurers from meaningfully auditing Sutter's bills. As a result, the health insurers pay these inflated claims and pass on much of the costs to consumers in the form of higher premiums.

Recent press reports have focused on Sutter's role in driving up health care costs in Northern California. Last month, the Los Angeles Times reported that hospitals in Northern California's six most populous counties collect 56 percent more revenue per patient per day than in Southern California's six most populous counties. The article cited Sutter Hospitals as the "driving force" of those higher costs. Sutter is the dominant hospital system and the price leader in Northern California, accounting for over a third of the hospital revenue generated in the region.

The case will be decided by a jury in Sacramento.

Today's announcement comes only weeks after Commissioner Jones intervened in a qui tam lawsuit against Bristol-Myers Squibb (BMS), one of the largest pharmaceutical companies in the U.S. That lawsuit alleges that BMS showered gifts on doctors and paid illegal kickbacks to them to increase the company's pharmaceutical sales in California. For more information on the BMS lawsuit, please select this link.

The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.